October natural gas futures jumped Tuesday on largely technical factors as traders hinted that any confirmation of a market bottom would require weathering the vagaries of Thursday’s inventory report. October rose 7.9 cents to $3.909 and November added 6.9 cents to $4.024. October crude oil added $1.63 to $88.90/bbl.

Top traders see the day’s move off session lows as potentially significant. “This market bounced significantly after dropping almost midway into our projected support zone of $3.75-3.80 per nearby futures. While the magnitude of the 14-cent rebound might suggest that a near-term price bottom has been placed, we are leaving open the possibility of a more decisive run toward the $3.75 area should Thursday’s weekly storage report offer a bearish surprise,” said Jim Ritterbusch of Ritterbusch and Associates.

Funds and managed accounts are antsy. “While the funds will be looking for even minor excuses to accept partial profits down at these levels, we still feel that upside follow-through to another $4 handle will require a significant storm event into the Gulf. At the present time, Tropical Storm Katia is developing within the eastern Atlantic and could eventually evolve into a hurricane. However, the storm path remains unclear and the need for additional storm premium appears limited at present.”

The Energy Information Administration (EIA) reported Tuesday that natural gas production in June rose 0.1% from upwardly revised May estimates. EIA said Lower 48 “wet” gas production in June totaled a stout 69.47 Bcf/d compared to May’s revised production of 69.39 Bcf/d in its monthly Natural Gas Gross Production Report (see related story). The EIA’s previous estimate for May was 69.22 Bcf/d.

By posting an 8-cent gain, futures may have dodged a significant bullet. “The lower bounds of our two-year-old triangular congestion pattern cuts at $3.803 Tuesday. Sink below this level and we see two possible downside targets: $3.693-3.591 (A=C) and $3.200-3.196-3.193-3.125 [1.618 (A=C)],” said Brian LaRose, analyst with United-ICAP. “[A]s lower lows from here will produce substantial intraday RSI [Relative Strength Indicator] divergence, we will be watching carefully for evidence of bottoming action.”

Market bulls were sympathetic to calls for warmth in the West. MDA EarthSat in its six- to 10-day forecast shows above-normal temperatures south and west of a circuitous line from North Dakota to Colorado to North Texas to Georgia. A pocket of below-normal temperatures is centered over Iowa. “The forecast turned cooler again [Tuesday] across the Midwest and East but much hotter out West,” the firm said.

“Based on an increasing model consensus, a strong upper-level ridge should grow over the West. Combined with offshore flow along the coast, this ridge could provide a major heat event for parts of the West late in the period. The stronger ridge also induces a bit more cooling downstream, which has resulted in the addition of some belows to the period composite over the Midwest. After a warm start, the Northeast should see cooler trends but of a lesser intensity compared to the Midwest.”

Former Hurricane Irene is gone and forecasters are now turning their attention to Tropical Storm Katia, about 630 miles west-southwest of the Cape Verde Islands at midday Tuesday. The National Hurricane Center (NHC) in its 11 a.m. EDT Tuesday report said Katia was holding on to 45 mph winds and was moving to the west-northwest at 18 mph. NHC also reported a tropical wave in the northwest Caribbean and gave it a 10% chance of development.

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